UK Ownership and Control: A Transformational Analysis

This study presents a transformational analysis of corporate ownership and control in the UK perspective. Using a sample of 643, UK listed non-financial companies and data from the Office for National Statistics, this study reveals that, UK equity ownership has witnessed a rapid decline by major domestic institutional investors and increase in foreign ownership since 2004. It is further reported that ownership in the UK is more complex than considered by most previous ownership studies. The study reveals that, 42% of UK companies have multiple large shareholders and about 40% of the sample firms separate cash flow-rights from control-rights, confirming the presence of controlling block holders. This is contrary to the traditional understanding that UK ownership structure is dispersed. Therefore, this study contributes significantly to the literature by examining the issue of UK corporate ownership and control structures, which did not receive appropriate attention in the past in the UK context.Key words: Ownership structure, Institutional ownership, cash flow rights, control right

Efficiency of Capital Adequacy Requirements in Reducing Risk-Taking Behavior of Tanzanian Commercial Banks

This paper intended to examine the relationship between capital and risk of Tanzanian commercial banks during the period 2009-2014 using the Two Stage Least Square (2SLS) method of estimation. The empirical findings reveal a direct relationship between capital ratios and bank risk-taking behavior implying that as the level of banks’ risk increases bank managers tend to increase the bank capital ratios so as to prevent banks from violating the regulatory minimum capital requirements.The study also found a positive relationship between regulatory pressure and capital. This positive impact shows that Tanzanians large commercial banks approaching the minimum capital requirements are inclined to improve their capital base in order to circumvent the penalties resulted from infringing  the legal requirements of keeping minimum capital ratio.The study further shows  a positive and significant association between profitability and bank capital implying that that as the profitability of banks increases they retain more earnings to raise the level of their capital. Hence, it is concluded that improvement in profitability helps banks to increase their capital ratios and prevent them from penalty associated with failure to meet minimum capital requirements. Key words: Bank Capital Adequacy, Risk-taking behavior, Regulatory Pressure, minimum capital requirements

Evaluation of Financial Performance of Foreign and Domestic Banks Operating in Tanzania

This study aimed at conducting a comparative analysis of the financial performance of foreign owned banks and domestic banks operating in Tanzanian banking sector for the period between 2009-2016 using DuPont model and the paired-sample t-test analysis. The model depicts that return on equity of banks is affected by three parameters namely; Profit margin (PM), Assets utilization AU and Equity Multiplier (EM). The results of the analysis show that both returns on equity (ROE) and return on assets (ROA) of foreign banks are higher than those of the domestic banks. The higher ratios of ROA and ROE observed in foreign banks may have been caused by reported higher interest margin (PM) and Equity Multiplier (EM) signifying a better cost management and use of large financial leverage by foreign banks than domestic banks.Based on the results portrayed by this study we may  conclude that foreign banks in Tanzania not only have higher return on assets ratio (ROA), but also higher return on equity (ROE) ratio  due to a larger use of financial leverage rather than the profitable use of assets. This implies that, compared to domestic banks, foreign banks manage their capital more efficiently than their domestic counterparts Key words: Foreign, Domestic, Banks, Performance, DuPon

The Role of Agency Banking in Promoting Financial Inclusion: Descriptive Analytical Evidence from Tanzania

The objective of this paper was to assess the leverage provided by agency banking in promoting the financial inclusion in Tanzania. The study was descriptive in nature and utilized primary data collected from bank agents’ outlets in Dar es Salaam. Overall, the study was very important as it tells how financial inclusion in Tanzania has been accelerated by use of agency banking practices.The analytical results of the study show that agency banking has helped to simplify banking service by reducing distance for customers to reach service point. The study has also found that liquidity problem is not a big concern as the agents’ operation are properly scrutinized and monitored by the parent banks to avoid cash shortage crisis and minimizes security issues. It is also found in the study that agency banking costs are reported to be lower compared to those of traditional banking services. It is therefore concluded, from this study, that greater geographical coverage brought about by agency banking is a stronger promoter of financial inclusion because services follow people closer to where they leave and hence reduce the travelling costs and other hassles involved like time wasted in long queues at bank branches. Agency banking model is therefore a success as regards to deepening financial inclusion. However, because the concept of agency banking is now widespread  banks’ practice to risk management should be emphasized so as to avoid entering into agency contract with bank agents whose credentials are doubtful. In addition to that efforts have to be made to increase the number of outlets providing bank agency services so as to achieve a greater geographical coverage. Apart from that all commercial banks offering agency banking services should limit operational costs on bank agents in order to avoid the increase in cost of services to customers. Concerning security, emphasis should be put on all agency banking outlets and more frequent monitoring to be carried out as discussed in the previous section. Lastly, financial education should be provided to help customers understanding the operations of agents and assure the security of their money. Key words: Agency, banking, security, cost, Geographical coverage, financial inclusio

Domestic Debt and Economic Growth in Tanzania

The main objective of this paper was to examine the impact of domestic debt on economic growth in Tanzania for the period 1990 to 2015 using Ordinary Least Square (OLS) regression method to estimate the effects. The study finds that there is an inverse but insignificant relationship between domestic debt and the economic growth of Tanzania as measured by GDP annual growth. The inverse relationship between domestic debt and GDP may be caused by different factors such as; increased trend in domestic borrowing, government lenders’ profile dominated by commercial banks and non-bank financial institutions which promotes the “crowding out” effect; the nature of the instruments used by the government ; the improper use of the domestic borrowed funds which may include funding budgetary deficits, paying up principal and matured obligations on debt, developing financial markets as well as fund other government operations. Other control variables relate with the GDP as predicted. For example, Inflation (INF) has a negative effect on the GDP growth rate, but the relationship is not statistically significant, while gross capital formation (GCF) has a positive statistically significant effect on GDP growth rate. Furthermore, foreign direct investment (FDI) showed a positive effect on the GDP growth rate and export (X) has a positive effect on GDP growth rate, and the relationship is statistically significant explaining that if a country applied an export-led growth economic strategy it enjoys the gains of participating in the world market. This means that an increase in export stimulates demand for goods which leads to increase in output, and as a country’s output increases, the economic performance also takes a similar trend. Finally, government expenditure (GE) had a negative effect on the GDP growth rate which may be explained by the increased government expenditures which are funded by either tax or borrowing. Therefore, what is required for countries like Tanzania is to have better debt management strategies as well as prudential financial management while maintaining to remain within the internationally acceptable debt level of 45% of GDP and maintain a GDP growth rate of not less than 5%. It is important for the country to realize from where to borrow from, the tenure, the risks involved and limitations to borrowing and thus set the right balance of combination of both kinds of debt. Another requirement is to properly utilize the borrowed funds. The central government’s objective should be to use the funds in more development-oriented projects that bring positive returns to the economic development.  The government should not only create a right environment and policies for investment to attract investment from domestic and foreign sources but also be cautious about the kind of investments that the foreign investors make

Towards Improving Households’ Investment Choices in Tanzania: Does Financial Literacy Really Matter?

This paper primarily aims to assess the impact of financial literacy on households’ investment choices. The paper employs secondary data from the FinScope survey (2017) conducted by Financial Sector Deepening Trust (FSDT). In particular, the study aims at establishing whether the choices of investment platforms are influenced by the financial literacy level of the heads of households. To do so, the study employed both bivariate and multivariate analytical techniques. The study finds that financial literacy is positively and significantly associated with household investment choices. More specifically, as households become more financially literate, they divert from investing in informal groups towards more formal investment platforms such as investment accounts, agricultural ventures as well as personal business. Such observations may be partly attributable to the facts that individuals whose financial literacy is sound enough are more likely to be equipped with skills and knowledge of risks associated with investment opportunities and some other several financial products. The study also reveals that financial literacy is significantly associated with households’ socio-demographic factors, and that the adult population exhibits a large financial literacy gap and, therefore, adults should not be considered as a homogenous group—instead, gender, age, education and income levels of the households, which are showcased in this study, should also be taken into consideration. The study opines that, because most of households, as revealed in the survey from which the employed dataset is based, are hailing from rural settings where agriculture is the main economic activity, we establish that agricultural ventures require a complete revamp for Tanzania to become a middle-income economy through its industrialization agenda. The study also proposes the financial literacy programmes to be rolled on to students from early stage of their education such as secondary schools

Towards Extending Dividend Puzzle Debate: What Motivates Distribution of Corporate Earnings in Tanzania?

This paper investigates the determinants of dividend policy in Tanzania. The study employed a panel data of non-financial firms listed on the Dar es Salaam Stock Exchange (DSE) for the period 2008–2017. The paper reports profitability, liquidity, firm size, leverage, firm growth, previous dividend, and GDP as the major determinants of corporate dividend policy. According to the results, leverage, firm growth, and GDP are negatively related to dividend payout ratio while firm size, profitability, liquidity, and lagged dividend are positively related to dividend policy. More specifically, large-sized firms, highly profitable firms, and firms who paid dividend in previous years are more likely to consider paying dividend. However, payment of dividend will all depend on whether the firm is liquid enough to afford that. On the other hand, high-growth and leveraged firms would not probably consider paying dividend, and will, therefore, opt saving money to finance their expansion and honor their debt obligations. Following these results, corporate managers are advised to consider preferences of investors towards developing corporate dividend policy; to strive paying dividend whenever economically viable (as it signals the firm’s reputation), and to limit excessive borrowing to protect firms from getting into financial meltdown (although borrowing is considered a control tool for agency-related problems)

The effect of separating corporate ownership from control on dividend payments

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Demographic and Socio-economic Factors Influencing Households & Investment Choices in Tanzania:

AbstractThis paper primarily aims to determine the demographic and socio-economic characteristics affecting households’ investment choices in Tanzania using data from the FinScope survey which was done in 2017. The study employed multivariate analytical technique. The results of the paper reveal that increase in education level lowers the likelihood of individual household to invest in informal groups as well as agricultural ventures. Also, the study shows that men are more risk averse and less likely to invest in the informal groups, investment accounts as well as personal businesses. It is also revealed that urban households may easily access financial products due to the presence of a good number of financial institutions located in urban compared to rural areas, and that urban households rarely participate in agricultural activities due to lack of enough land in townships. Finally, the paper confirms that employed households are more likely to make a good financial decision because most of them are believed to have good education which enable them to access formal financial literacy education. Consequently, the study opines that, because most of households, as revealed in the survey from which the employed dataset is based, are hailing from rural settings where agriculture is the main economic activity, we establish that agricultural ventures require a complete revamp for Tanzania to become a middle-income economy through its industrialization agenda

Complex corporate ownership and control in UK listed companies

This thesis sets out the empirical evidence on complex ownership and control using data for UK listed firms adapted from Faccio and Lang (2002) for the period 1996-1999. Using OLS estimation method, the thesis links corporate financial policies and performance with ownership and control. It reports a negative relationship between control concentration of the largest shareholder and dividend pay- out ratios in companies which separate ownership from control, and a positive relationship between ownership concentration of the largest shareholder and dividend payout ratios, in companies which do not. I show that higher control-rights grant larger shareholders incentives (lower cash-flow rights) and ability (higher control-rights) to extract private benefits, for companies which separate ownership from control. Supportive evidence emerges of a positive relationship between the largest shareholder's ownership concentration and debt ratio; when ownership concentration of the largest block holder increases, so does the possibility of collusion with management. It is further reported that, family companies employ more debt in their capital structures to prevent dilution of control and have significantly higher debt ratios and lower pay-out ratios than companies controlled by financial institutions. It may be argued that, the absence of strong external monitors makes it easy for family companies to pass control between generations. Finally, I test the relationship between voting rights of the largest shareholder and firm performance and report a negative relationship, suggesting reduction of corporate values. I demonstrate that firms whose control is shared among two family block holders accumulate more debt and perform worse than firms where the largest family block holder shares control with the second largest financial institution. This suggests that the incentives to collude with the largest shareholder or to monitor the largest shareholder are significantly affected by the type of block holder. It is also shown that firms with control coalition having more than two block holders perform better than those with only two block holders, especially those of the same type.EThOS - Electronic Theses Online ServiceGBUnited Kingdo